Wednesday, June 15, 2022

When Is Life Insurance Worth It

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Is Life Insurance Worth It?

According to British Seniors Funeral Report 2021, between 2016-2021 the average cost of a funeral was around £5,631. Over 50s policies as well as level and increasing term policies can be used to contribute towards funeral payments..

Over 50s life cover differs from term life in that there is no fixed length to the policy it simply exists as long as you live and pays out upon your death. That doesnt mean to say that you will pay indefinitely for a fixed sum of money though. You will stop paying premiums when you pass away, on your 95th birthday or on the policy anniversary date.

The payout doesnt necessarily need to contribute towards your funeral, however if that is your main motivation for taking out the policy then you might also want to consider a Funeral Benefit Option.

How Whole Life Insurance Works As An Investment

When you pay whole life insurance premiums, a portion goes towards the cost of insurance, some is put towards sales and administrative fees, and the rest goes towards the policys cash value. In the early years, fees and the cost of insurance use up the majority of your premium but, over time, an increasing amount is contributed towards the cash value.

The cash value is basically an investment account inside your whole life insurance policy that grows at a guaranteed rate over time. The guaranteed rate of return is typically enough that your cash value should equal the policys death benefit when you turn 100, assuming you dont make withdrawals. A simple way to think of your policys cash value is that its the amount of money you would get in return for giving up the policy to the insurer.

During the first 10 to 20 years of coverage, a whole life insurance policys cash value is quite small, due to fees and the cost of coverage. Therefore, we wouldnt recommend whole life insurance as an investment if youre older, as you may not live long enough to see good returns and would save money with a guaranteed universal policy.

If you purchase whole life insurance from a mutual insurance company, you may receive dividends as your cash value grows. Mutual insurers are owned by their policyholders, so profits are redistributed as dividends annually.

Is Life Insurance Worth It

If you have dependents, life insurance may be worth the premiums youll pay. It helps give you the peace of mind of knowing that your spouse, children, and anyone else who relies on your income will be taken care of if you die. If you dont have dependents, there still may be circumstances where its worth it, but you should do the calculations to make sure youre getting value for your money.

A friend of mine was complaining recently about his insurance payments. While he pays his life insurance premium every month, theres little chance his family will ever get a life insurance payout.

He was frustrated by the aspect of life insurance that makes it so unappealing to most people. If the policy never gets used, the payments seem like wasted money. If it does get used, the payout will be little consolation in the face of overwhelming grief.

I reminded him that hes not buying a policy so much as hes buying peace of mind. He can rest easy knowing that if something happens to him, hes done all he could to help with financial protection for his family. Thats what all insurance really is a measure of protection to make you feel better.

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Are The Benefits Of Life Insurance Worth The Cost

That depends entirely on your own personal circumstances. The cost of life insurance varies depending on lots of different factors, including your age, overall health and chosen coverage amount. That’s why it’s so important to get a quote, before you decide whether it’s worth it.

If you have financial commitments, such as a mortgage, which you wouldn’t be able to cover without your income, life insurance is a good idea. Particularly if you have children who are financially dependent or your partner relies on your income.

However, if you’re a senior with poor health, your life insurance policy will be more expensive than that of a healthy young person. If your kids and partner are financially independent or you have investments that would provide income even after you could no longer work, you may decide the regular premiums just aren’t worth it.

Of course, the decision is entirely up to you. Everyone’s personal circumstances are different and we can’t tell you what’s right in your case.

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Key Life Stages Where Life Insurance Can Help:

Is Whole Life Insurance Worth It?


While life insurance may not be top of mind for a millennial, should you choose not to purchase it, you may be missing out on an important component of financial planning. Young people can take advantage of lower premiums since the younger and healthier you are, the lower your premiums will be.

Additionally, remember that life insurance providers take your family health history into consideration when determining your premiums, since some health conditions are hereditary. When you secure coverage earlier in life, your immediate family members are also younger and more likely to be in good health. This means your premiums may not be affected by ageing family members.

Life insurance also acts as an investment opportunity, offering cash value if you have a permanent life insurance policy.

Middle Aged:

At this stage of life, it is likely that you have purchased a home and have been making mortgage payments. A life insurance policy can protect your spouse from covering large debts, such as a mortgage.

If your children are young and dependent upon your income, life insurance can provide financial protection to ensure their lifestyle is not adversely impacted. Should they be starting post-secondary education, a life insurance plan can help cover tuition expenses.


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What Is Life Insurance

In simplest terms, life insurance involves a contract between you and an insurance company.

You pay them monthly or annual premiums, and if you die, the insurance company pays a lump sum, also known as a death benefit, to your beneficiaries.

Your beneficiaries can use this money for anything. For example, they can use it to pay off the mortgage, put kids through college, and pay incoming bills.

This is a way to keep your family financially safe even when the unthinkable happens.

When Life Insurance Isn’t Worth It

    The principle behind life insurance is simple, in theory. It’s also morbid, at least compared to other financial services. You pay small amounts at monthly intervals, so that when you die, a beneficiary of your choice gets a sum of money approximating what you would have earned had you stayed alive.

    That’s the stark truth right there, which a lot of life insurance customers fail to comprehend: the service is supposed to be nothing more than a replacement plan. The idea is that should your family suffer a crisis that transcends finances, at least their finances won’t be impacted too negatively. If you die, your spouse and kids won’t have to take on multiple jobs, beg for alms, nor lose the house and car.

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    Types Of Life Insurance: Which Is Right For You

    16 Min Read | Dec 30, 2021

    If you have a car, you have car insurance. If you have a home, you have homeowners insurance. If you have a life . . . well, it only makes sense to carry life insurance, right?

    Life insurance is one of the most vital pieces of your familys long-term financial planand its the one we want to discuss the least. Its purpose is simple: to replace your income for your family if you die. But with all the choices available, finding a policy thats just right for you could lead to extreme confusion and frustration.

    Fortunately, it doesnt have to be that way. Well take you through the most common life insurance policies and help you find the one you need.

    Here is a list of different types of life insurance:

    Is Life Insurance A Smart Investment

    Is Term Life Insurance Worth It?? + Policygenius Review

    Using permanent life insurance as an investment might make sense for certain high-net-worth individuals looking to minimize estate taxes. But for the average person, buying term and investing the difference is usually the better option.

    Even if you’re purchasing life insurance primarily for investing purposes, it’s still important to research the best life insurance companies to ensure you’re getting the most beneficial policy possible.

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    Should You Invest In Whole Life Insurance Or Term Life Insurance

    Permanent cash value life insurance policies, such as whole life insurance, have an investment component as well as life insurance coverage. However, the primary purpose of these policies is still to pay out a death benefit to your beneficiaries when you pass away, and this benefit makes up a significant portion of the cost of buying a policy. Thats why whole life insurance policies and other cash value life insurance policies dont make sense as an investment unless one of your objectives is to have lifelong coverage.

    Assuming you do need life insurance, there are four broad groups of insurance to choose from based upon your financial situation:

    Type of Policy
    Whole and universal life insuranceLifetimeYoure considering guaranteed universal life insurance for the permanent coverage, but have a broad portfolio of investments already and want to diversify.Through a cash value life insurance policy you can get guaranteed returns or take greater risk, such as investing the cash value in an index or actively managed portfolio.

    Since guaranteed universal life insurance policies offer permanent coverage, theyre still much more expensive than term life insurance , but you save money as theres little to no investment component. Whole life insurance policies are regularly ten times the cost of term life insurance since youre paying for permanent coverage, additional administrative costs plus funding the investment account.

    Can You Switch To A Better Deal

    If youre young and/or healthy, it might be worth seeing if you can a better deal elsewhere.

    But as you get older or develop medical problems, you might find its cheaper to stick with a policy you bought when you were younger.

    If you decide to switch, make sure you dont cancel your existing policy until the replacement policy is fully set up and you have made the first monthly payment.

    When youve cancelled a policy, you cant change your mind.

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    What Is Life Insurance For A Child

    Like a life insurance policy for an adult, a life insurance policy for a child is a contract with an insurance company. Premiums are paid in return for the promise that the insurance company will pay a death benefit if the child dies.

    With an insurance policy for an adult, the policyholder typically is the insured personthe one who is covered by the policy. With a policy for a child, the child is insured, but a parent, grandparent or legal guardian is the policyholder. The policyholder also can be the beneficiary who receives a payout if the insured child dies.

    Life insurance policies for children typically are whole life insurance policies, which means they will provide lifelong coverage as long as premiums are paid. Premiums tend to be guaranteed, so they wont increase over time. Plus, a portion of the premium goes toward building cash value, which can be accessed while the child is alive for any reason.

    You cant buy a term insurance life policy for a child, which would provide coverage only for a certain number of years. However, if you buy a term life insurance policy for yourself, you might be able to add a rider to cover all of your children until they reach a certain age, at which time the coverage likely can be converted to permanent policies for them at an additional cost.

    Life Insurance For Partners

    Is Life Insurance Worth It?

    If youre not the breadwinner, is life insurance worth it? Life insurance is not just for high earners, it can be invaluable for a range of households. If you look after the children at home, that takes time, energy and comes at a cost. Ask yourself, could your family manage if you were no longer around? Would your partner have to take time off work to look after the children? Your life insurance policy could help with some of these worries by paying a cash sum which could be used to help towards the mortgage for example, or covering everyday living costs such as childcare.

    If you have a partner or spouse, you can decide whether to get single or joint life insurance. The latter pays out upon the death of the first insured person, at which point the policy ends. However, you can have two single policies as a couple, which means that even after the first death, the surviving partner still has their own policy.

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    Why Should You Get Life Insurance

    If the benefits of buying life insurance outweigh the costs, itâs worth buying coverage to protect your family. Often, youâll spend far less for coverage than your family would receive if you died unexpectedly. Hereâs what typical expenses look like for the average American family:

    • Mortgage – $293,349

    • College tuition for a public four-year in-state university – $42,240

    • Everyday bills and expenses – $63,036

    • Medical debt – $2,000

    • End of life expenses – $8,000 to $10,00

    Thatâs $503,352 in expenses that your family would be liable for. Meanwhile, a healthy adult in their 30s can expect to pay an average of $24.67 a month for a 20-year policy with a $500,000 death benefit, while a healthy adult in their 40s would pay$35.72. Thatâsa fraction of the cost â $5,920.80 and $8,572.80 over 20 years, respectively.

    When you get life insurance, the amount of money your beneficiaries receive after filing a claim far exceeds the amount you spend on coverage, even if you customize your policy with added riders. In this scenario, itâs more than 58 times the amount you pay for your policy. For those with financial obligations, the premiums you pay produce far greater dividends.â Learn more about the benefits of having life insurance protection

    Ready to shop for life insurance?

    Factors In Whole Life Insurance Pricing

    The coverage amount you choose will help determine your rate, along with:

    • Age and gender
    • Past and current health conditions
    • The health history of your parents and siblings
    • Nicotine and marijuana use, including nicotine patches and gum
    • Substance abuse
    • Driving record
    • Dangerous hobbies and activities (such as piloting planes or rock climbing

    For whole life, there are a variety of other features and provisions that can affect costs as well, such as:

    • Payment period: You can choose to pay for the entire policy in a short time frame, such as 10 or 20 years. The premium would rise substantially given the front loading of payments.
    • Guaranteed return rate: Some companies offer a higher guaranteed return, which can result in higher annual premiums.
    • Dividend crediting: Many whole life policies pay out a dividend, and policyholders can choose how to receive it. Receiving your dividend payments as a credit toward premiums reduces your annual out of pocket cost.

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    Receiving Your Cash Value

    How much you receive if you decide to sell your policy will vary depending on many factors, including the type of base insurance policy you have.

    If you decide that youd like to cash out on your remaining savings from your life insurance policy, consider selling it in exchange for a full lump sum, or cash value. This option is the most common, allowing you to alleviate larger debt, pay for medical expenses or fund school tuition. Receiving the full cash value or life settlement from your insurance policy provides the most flexibility.

    Another option is to receive a structured settlement, or a steady income stream of payments, from your cash value after selling your life insurance policy. This allows policyholders to pay for ongoing expenses while adding to their fixed income. This option lacks the flexibility of a full payout, but guarantees some financial stability over a set period of time.

    How To Save Money On Life Insurance

    Is Life Insurance Worth It? Term vs Whole Life Insurance UK

    Some ways to save on life insurance premiums include:

    • Choose a term life insurance plan as its cheaper and you can change it later.
    • Buy life insurance early when you are still young and healthy and the life insurance premiums are lower.
    • Shop around for the best life insurance in Canada.
    • Maintain a healthy lifestyle and choose an annual premium payment option.
    • Keep paying your premiums so you dont lose the benefits you have gained by buying in while youre young.

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    Who Needs A Term Life Insurance Plan

    If you have loved ones who are financially dependent on you like partners, children, siblings or parents then buying life insurance coverage is absolutely worth it. Even if you dont have financial dependents yet, life insurance can be a valuable solution for making death easier on a family The payout from a policy can help cover financial obligations like funeral expenses or help pay your outstanding debts, if any. It can be your financial legacy.

    A simple way to understand if you need term life insurance is to use an online life insurance calculator. It will take into consideration your age, income, family structure and more to provide you with a personalized recommendation. A life insurance calculator will also tell you if you dont need coverage at all.

    In short, term life insurance is a worthwhile way to help financially protect your loved ones. A policys death benefit could help:

    • Replace lost income and pay living expenses, like rent or a mortgage
    • Pay debts you leave behind
    • Provide for your kids care if you are a stay-at-home parent
    • Pay for burial, estate taxes and other final expenses
    • Fund college costs
    • Pay unpaid medical bills or taxes
    • Create an inheritance

    For a small amount of money, you can support your familys financial well-being even after your death and if you need another incentive to become a life insurance policyholder, remember that the death benefit your chosen beneficiaries will receive is typically tax-free.

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